What is Labour Dispatch in China?
Human resource management in China can be a difficult issue for foreign investments in China, especially the ones that have a deadline or do not have enough knowledge about HR. The employee administrative procedures that include areas like recruitment management, applications of work permits, payroll and taxes, and labour contracts can make operations risky and slow.
Therefore, labour dispatch is the practice of using an employment service agency to hire employees instead of direct employment.
Labour dispatch is very popular in China and foreign and national entities use them to manage and supply the workforce demands.
Read on to know more.
How it Works
There are three parties in labour dispatching:
- The dispatched work agencies
- The end-users
- The dispatched labourers
The workers will sign contracts of employment in the Dispatched work agency instead of their employer. Therefore, the dispatched labourers are supervised by the client, end-user, or user enterprise. Even if they work for a user enterprise, since they do not have a direct contract between them, there are liabilities that the user enterprise is protected.
Labour dispatch provides triangular employment relations because the host company hires workers from a work agency.
The agency is the legal entity that is responsible for managing the employees. Since the dispatch agencies have the knowledge and considerable experience in hiring local workers, the foreign entities find it more cost-effective, efficient, and flexible to hire through labour dispatch.
Categories of Dispatched Employees
- Temporary employees with a contract of not more than six months.
- Auxiliary employees that give support services that are not central to the core business of the employer.
- The substitute employees who perform tasks to replace permanent employees during a time when permanent employees cannot work. The permanent employees could be on vacation, have an off-the-job training, maternity leave, etc.
Labor Dispatch Benefits in China
Labour dispatch has been popular in China for a long time when it comes to hiring domestic employees. it has a couple of impressive benefits that include:
- It is a compliant way of hiring seasonal employees – Labor dispatch is recommended for hiring temporary workers that will work on a project for a limited time. This is especially beneficial for seasonal businesses or has mostly project-based work.
- Offers a greater amount of flexibility – Labor dispatch is allowing companies to scale their production force depending on the business demands. This will allow them to avoid concerns when it comes to severance pay and early employee termination.
- Limited Liability – The official employer is the employment agency, so in case of a dispute, the business is protected from any liabilities caused by the dispute.
- It is good for a restricted budget in hiring the full-time employees – It is common for seasonal industries and the project-based work host companies to look for temporary workers, and hire them. Since the direct hiring methods are normally for recruiting long-term employees, managers find it more efficient to hire through labour dispatch.
- A lot of foreign subsidiaries have their requirements determined by the employment budget of the company. The requirements make it hard for host companies that require more workers to keep their daily operations running smooth. Therefore, labour dispatch is a way for host companies to hire temporary employees. Since there is a labour dispatch requires a service fee, instead of employee expenses, the company can be more efficient in recruiting more labour to comply with the requirement.
Headcount Limit
The headcount limit was a significant change in the practices of labour dispatch. Based on the Interim Regulations, the total number of dispatched workers used must not be more than 10% of the total number of employees.
The calculation must include permanent and direct employees, regular, and dispatched employees. The foreign enterprise regular operations don’t require them to follow this restriction on the position of dispatched employees.
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